Value of $100 in 1917, adjusted to 1970

What happened to prices between 1917 and 1970

Between 1917 and 1970, the Consumer Price Index went from 12.8 to 38.8. Cumulatively, prices increased 203.1%, which works out to an average of 2.11% per year. Put differently, a dollar in 1917 bought what $0.33 buys in 1970.

1917 is when World War I inflation stopped being a background trend and became the dominant fact of American economic life. Consumer prices rose 17.4% for the year, more than double the previous year’s already sharp increase, as the country’s April 6 entry into the war layered federal war spending on top of an economy already strained by military demand and worker shortages. Congress paid for the war with the War Revenue Act that October, which sharply raised income taxes, created a new tax on wartime business profits, and, in a small but very visible change for ordinary households, raised the cost of a first-class stamp from 2 cents to 3 cents that November, the rate’s first move since 1885. Herbert Hoover took over the new Food Administration in August and asked Americans to conserve food voluntarily rather than face formal rationing, a campaign that became famous enough that “Hooverize” entered the language as a verb for cutting back. None of it slowed prices much: the 17.4% increase would be topped again the very next year, in 1918.

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The destination year: 1970

Consumer prices rose 5.7% in 1970, up from 1969’s 5.5%, extending a run of faster price growth that stretched back to the mid-1960s, even as a recession that began in December 1969 pushed unemployment toward 6%. Prices and joblessness rising together confounded the era’s economic thinking, which held that policymakers could trade a little more inflation for a little less unemployment; 1970 was an early sign that trade-off was breaking down, a pattern that would harden into stagflation later in the decade. Washington restructured how it delivered mail that year: after postal workers staged the first strike ever by federal employees that March, Congress passed the Postal Reorganization Act in August, replacing the cabinet-level Post Office Department with the independent U.S. Postal Service. Environmental policy also took shape in 1970. An estimated 20 million Americans marked the first Earth Day on April 22, and the Environmental Protection Agency opened that December to enforce the Clean Air Act and the pollution rules that followed. The Vietnam War kept dividing the country: on May 4, National Guard troops fired on antiwar demonstrators at Kent State University in Ohio, killing four students and setting off strikes on hundreds of campuses. A median household earned $8,734 that year, a gallon of gas averaged 36 cents, and a first-class stamp cost 6 cents, the rate it had held since 1968. Prices stood 291.9% above their 1913 level by the end of 1970, a milestone that would look almost mild against the decade still to come.

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